Fixed Income Cash Flows and Types Flashcards
What is a “Bullet Bond”?
A bond whose principal repayment is made entirely at maturity.
What is amortizing debt?
A loan or bond with a payment schedule that calls for periodic payments of interest and repayments of principal.
What is a “Fully-Amortizing Loan”?
A loan or bond with a payment schedule that calls for the complete repayment of principal over the instrument’s time to maturity.
What is a “Balloon Payment”?
A large payment required at maturity to retire a bond’s outstanding principal amount.
What is a “Partially-Amortizing” Bond?
A loan or bond with a payment schedule that calls for the complete repayment of principal over the instrument’s time to maturity.
What are Mortgage-Backed Securities?
Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property.
What is a “Sinking Fund”?
Provisions that reduce the credit risk of a bond issuer by requiring the issuer to retire a portion of the bond’s outstanding principal each year.
What are “Waterfall Structures”?
These represent the distribution order for cash flows and risk to different tranches in a financing structure.
What are “Step-Up Bonds”?
Bonds for which the coupon, be it fixed or floating, increases by specified margins at specified dates.
What are “Leveraged Loans”?
Loans made to a borrower or issuer with relatively lower credit quality and/or higher leverage.
What are “Credit-Linked Notes”?
Bonds whose coupon changes when the bonds’ credit rating changes.
What is a “Payment-in-kind”?
a bond feature whereby coupon payments can be fully or partially paid in the form of additional issuance or added to the principal amount.
What are “Green Bonds”?
Bonds used in green finance whereby the proceeds are earmarked toward environmental-related products.
What are “Index-Linked Bonds”?
A bond whose coupon payments or principal repayment is linked to a specific index.
What are “Inflation-Linked Bonds”?
A type of index-linked bond that offers investors protection against inflation by linking the bonds’ coupon payments and/or the principal repayment to an index of consumer prices.
Also called “Linkers”
What are “Treasury-Inflation-Protected Securities” (TIPS)?
A U.S. Treasury Bond with a principal that is adjusted for changes in the Consumer Price Index (CPI).
TIPS are typically issued in 5, 10, and 30year maturities.
What is a “Capital-Indexed Bond”?
A type of index-linked bond for which changes in the index are captured with adjustments to the principal.
A common example is a TIP issued by the U.S. government.
What is an “Interest-Indexed Bond”?
A type of index-linked bond for which changes in the index are captured with adjustments to interest payments.
What are “Deferred Coupon Bonds”?
Bonds that pay no coupons for their first few years but then pay a higher coupon than they would otherwise normally for the remainder of their life.
Also called “Split Coupon Bonds”.
What is a “Callable Bond”?
A bond containing an embedded call option that gives the issuer the right to buy the bond back from the investor at specified prices on predetermined dates.
What is a “Fixed-Price Call”?
A contingency provision that grants an issuer the right to buy back a bond at a predetermined price in the future.
What is the “Call protection period”?
The time during which the issuer of a callable bond is not allowed to exercise the call option.
What is a “Call Period”?
The time during which the issuer of a callable bond can exercise the call option.
What is the “Call Price”?
The price at which the issuer of a callable bond has the right to purchase the bond from investors.
What is “Call Risk”?
The uncertain maturity and limited price appreciation associated with callable bonds.
What are “Putable Bonds”
Bonds that give the bondholder the right to sell the bond back to the issuer at a predetermined price on specified dates.
What is a “Convertible Bond”?
A bond that gives the bondholder the right to exchange a bond for a specified number of common shares in the issuing company.
What is a “Conversion Price”?
For a convertible bond, the price per share at which the bond can be converted into shares.
What is a “Conversion Ratio”?
For a convertible bond, the number of common shares that each bond can be converted into.
What is “Conversion Value”?
For a convertible bond, the value of the bond if it was converted at the market price of the shares.
Also called “Parity Value”
What is a “Warrant”?
An attached option that gives its holder the right to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.
What are “Contingent Convertible Bonds”
Bonds that are automatically converted to equity if a specific event or circumstance occurs; such as the issuer’s equity capital falling bellow the minimum requirement set by regulators.
What are “Domestic Bonds”?
A type of bond for which the issuer’s domicile and jurisdiction of issuance are the same.
What are “Foreign Bonds”?
A type of bond for which the issuer’s domicile and jurisdiction of issuance are different.
What are Eurobonds?
A type of bond issued internationally, outside of the jurisdiction of the country in whose currency the bond is denominated.
What are “Bearer Bonds”?
Bonds for which ownership is not recorded; only the clearing system knows who the bond owner is.
What are “Registered Bonds”?
Bonds for which ownership is recorded by either name or serial entity.
